Downers

The Buzz

"Fixed income powerhouse"

"Some good funds"

"Excellent macro research team"

"Massive"

About Pacific Investment Management Co. (Pimco)

PIMCO-ed out to Allianz

California-based Pacific Investment Management Company (PIMCO) is
an institutional money manager with more than $800 billion in
assets under management. PIMCO was established in 1971 as a
subsidiary of Pacific Mutual Insurance Company (now known as
Pacific Life) to sell separate management services for employee
benefit plans, endowments and foundations. At its inception,
PIMCO had a mere $12 million in assets under management. By
2000, that number had ballooned to more than $215
billion.

In May 2007, German insurance giant Allianz AG purchased a majority
stake in PIMCO's parent, PIMCO Advisors L.P., today known as
Allianz Global Investors of America L.P., leaving Pacific Life with
a minority interest of just 3 percent. Although Allianz owns
a 97 percent stake in PIMCO, it has little input in the day-to-day
affairs of PIMCO, which still operates like a partnership. At
the end of 2007, PIMCO's client list included more than half of the
100 largest corporations in the U.S. As in previous years, PIMCO
took home several awards and honors in 2007. Derivatives Week
named the firm Credit Investor of the Year, Foundation &
Endowment Money Management called PMIC the Nonprofit Bond Manager
of the Year and Pensions Management named it High Yield Bond
Manager of the Year.

Covering all bases

PIMCO is divided into four main departments: portfolio management,
account management, product management and business
management. Portfolio managers are responsible for market
research, portfolio strategy and trade execution. Account
managers conduct client servicing, develop solutions for client
investment needs and ensure investment portfolios meet clients'
objectives. The product management unit provides the link
between portfolio management and account management, and is
responsible for launching new investment vehicles and growing
PIMCO's institutional business. The business management group
is responsible for setting the strategic vision of the firm.
PIMCO has more than 1,000 employees, including more than 335
investment professionals, who service approximately 870
institutional clients and over 5,400 mutual fund clients. Every
sector of the bond market is included in PIMCO's investment
universe, including governments, corporates, mortgages, asset
backs, money market and hedged international. Based in
Newport Beach, Calif., the company also has offices in New York,
Hong Kong, London, Munich, Singapore, Sydney, Tokyo and
Toronto.

Bond king

As big as PIMCO has become, the company name is not nearly as
recognized as that of company founder and chief investment officer
Bill Gross. As manager of the country's largest bond fund and
anointed by Fortune as the "bond king," Gross is arguably the
best-known bond expert in the world. With a Warren
Buffet-like status in the fixed-income world, Gross' commentsâ€"or
even mere rumors of what he's buying or sellingâ€"can send stocks
soaring or plummeting. In July 2006, Motley Fool said Gross
is "simply the best bond-fund manager in the business." And in May
2007, Investment Advisor Magazine called him one of the most
influential people on Wall Street. Also in 2007, Gross and his
PIMCO team were named Fixed-Income Manager of the Year by
Morningstar for the third time in 10 years. Why the
hype? According to Motley Fool, Gross, a former professional
blackjack player, "knows how to make a gamble pay off." More
specifically, "Gross closely watches macroeconomic factors in his
investing. The literature for [PIMCO] Total Return calls it a
'top-down process,' whereby Gross and his team develop a three- to
five-year outlook for the global economy and interest rates.
Everything is considered: currency movements, the yield curve, the
credit markets, and so on. It's a complex job, and Gross does
it better than anyone else. His approach is so good, in fact,
that from 2002 through 2006, Total Return had beaten the Vanguard
500 Index 4.61 percent to 2.38 percent a year.

So where did Gross go
wrong?

When the index wasn't performing well in 2006, investors stopped
putting money into it. Critics, like The Wall Street Journal,
called into question Gross' ability to adapt to the changing bond
market. Admittedly, he was suddenly playing it safe, steering
away from riskier bonds and focusing on short-term Treasurys and
currency bets, among other things.

Unaccustomed to not being on topâ€"PIMCO's Total Return Fund is the
largest bond mutual fund and has for years outpaced both the bond
market and almost all of its competitorsâ€"the normally chilled out
Gross (he practices yoga regularly) started feeling the
stress. According to the Journal, "With PIMCO's bets
misfiring, Mr. Gross was so stressed that he left the office,
taking an unplanned vacation, sitting at his home with his
wife." He told the paper, "I just had to leave for nine days,
I couldn't turn on business television, I couldn't pick up the
paper, it was just devastating â€¦ We've increased the volatility
[of the portfolio] but I'm not enjoying it. You can't sleep
at night." By mid-2007, though, it seemed that Gross had
cleared his head and the gambler had jumped back into the
game. "Everybody is selling risky assets," he told Forbes in
September. "We've been out of the market. Well, now
we're back in."

Solid foundation

Many businesses try to give back to the community, but not all of
them can say they have their own foundation to do so. The
PIMCO Foundation helps organizations in Orange County, Calif., to
better the quality of life in the community. The foundation
offers grants to an organization annually, and it's very specific
about whom it's trying to helpâ€"minorities, senior citizens and
organizations that help the disabled or promote women's health take
center stage here. There's an interest in drug and alcohol
prevention for school children and helping abused children as well.
It's PIMCO's way of helping "people in need to lead more rewarding
and responsible lives."